Social Security Looks Good From Here at 75

Retirement program, begun in 1935, has challenges but continues to fulfill its responsibilities.

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Social Security celebrates its 75th anniversary this year. The program today is fundamentally not so different than it was in 1935. But it has come to play a more important role in retirement security than its creators anticipated. Its linkage with Medicare, which turns a youthful 45 this year, has combined to help lower the poverty rate among seniors from about 30 percent to less than 10 percent. That's an enormous shift in the well being of older Americans. So, when you look at the shortcomings of society's safety net for seniors, please keep in mind how powerfully these programs have done their "big picture" jobs.

[ See America's Best Affordable Places to Retire.] Also, while Social Security continues to resemble the program that was created 75 years ago, we're not very similar to those early beneficiaries. Remaining life spans on average are nearly 20 years for people who turn 65 this year. Millions of us will live well into our 90s, and becoming 100 -- a centenarian -- is no longer an unusual event.

The other major changes are that traditional pensions are disappearing and individuals are not saving nearly enough to build comfortable retirement nest eggs. The traditional three-legged stool of retirement -- Social Security, pensions, and savings -- looks more like a pogo stick with two small struts. Social Security has become the major source of retirement income for most Americans. This is not a good thing but it's in no way the fault of the Social Security program.

At a time when it's fashionable to be savagely critical of nearly everything, Social Security stands out as a stunning success story. If the program has challenges, and it certainly does, they are not the result of its fundamental design and operation. Perhaps the biggest knock on it is how the federal government has used surplus Social Security funds to help operate the rest of the government. At a time when it would be marvelous to actually have those surplus funds in a bank somewhere, all that Social Security has is a bunch of IOUs from Uncle Sam. On paper, this is OK. In reality, it's not, especially when those surpluses historically have been used to mask, and probably encourage, overall federal budget deficits. Again, though, that's not the result of anything that Social Security has done.

[See Determine Your Future Social Security Benefits.]

There are, to be sure, periodic stories about Social Security benefit denials that appear callous and even unfair. But for nearly all Social Security recipients, the payments come when they're supposed to, and in the proper amounts. When it seemed during the Great Recession that little about retirement could be depended on, Social Security continued to be dependable.

Many people, particularly younger ones, look at the cash-and-carry condition of Social Security and scoff at the notion it will even be there to help meet their retirement needs in 2050 and beyond. Unless I become one of those increasingly common centenarians, I won't be around to know how this story turns out. But when compared to the huge deficit problems faced by all levels of government -- local and state as well as federal -- the price tag is relatively modest for placing Social Security on a sound financial footing for the next 75 years.

There will be a lot of criticism of Social Security if continued low rates of inflation cause the program to forego an annual cost of living adjustment (COLA) for the second straight year. If this happens, there are some Medicare provisions that will shield many retirees from annual premium hikes for their health insurance. But the protection is hardly complete, and healthcare costs are projected to continue rising at rates well in excess of the consumer price index (which determines the Social Security COLA). There also will be critics of whatever Social Security changes are proposed to strengthen the program's long-term financial health. We should get a good look at some proposals this fall when the deficit panel created by President Obama, the National Commission on Fiscal Responsibility and Reform, issues its report.

Let the critics have their say. I will still be happy to help blow out the candles on any Social Security birthday cake. I only wish I reach my 75th birthday looking as good.

[See Ways to Boost Income on Retirement Holdings.]